The cost-of-living crisis is a scenario in which the cost of everyday essentials are rising at a faster pace than average household incomes. And for the last three years, that has been the case in New Zealand, with some households disproportionately impacted. Unfortunately, households on low or fixed incomes are hardest hit. Food and fuel – both of which have seen the largest increases in price – make up a larger share of household budgets, and these households typically don’t have as much wriggle room. Budgeting becomes that much more of a head-scratching exercise.
But now, pay rises are running above inflation. The cost-of-living crisis is coming to an end, slowly. It may not feel like it yet, but inflation has eased, and will ease further. Falling interest rates and rising house prices in 2025 should also bring much needed relief to households. With interest rates headed south, we expect a turnaround in the housing market next year. The September REINZ market update showed early signs of strength. House prices rose 0.2% over the month, the first increase in four months. But there is still a long backlog to go through first. It’s not until next year that we expect any meaningful improvement. We forecast house prices to appreciate 5-7% in 2025.
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